An OECD View on Growth in the Second Half of 2012 and Next Year

September 10, 2012

The Organization for Economic Co-operation and Development, which conducts vast research capacity and close ties to governments in the advanced economies that it represents, reported its Interim Economic Assessment late last week including new macroeconomic projections. Based on those numbers, U.S. real GDP is expected to climb about 2.2% between 2Q12 and 4Q12, which would be a shade quicker than growth in the first half of this year. Canada is seen expanding 1.6% in the second half. Canada and the U.S. grew at the same pace in the first half.

Economies in Japan and Europe will be contracting in the second half, by comparison. Japan is to fall by some 1.2% annualized following growth of 2.1% annualized in 1H12. GDP in Germany, France and Italy, the three largest members of the euro area representing close to 70% of euro area GDP, is collectively projected to contract at a 0.9% annualized pace over the second half of 2012, significantly faster than in the first half, but British growth of negative 0.2% would be slower than in the first half.

With the start of 4Q12 just three weeks away, projected economic growth between 4Q12 and 4Q13 is a reasonably good proxy for the coming year. In the year to 4Q13, the OECD looks for U.S. and Canadian GDP to advance by 2.7% each. The projected growth gap between North America on the one hand and Japan and Europe on the other narrows, with 1.3% penciled in for Euroland, 1.6% for Japan, and 1.9% for Britain. This long view should be taken with a grain of salt. In the spirit that the sun always rises tomorrow, it is habitual for forecasts made by officials to embody eventual improvement even if recessionary conditions are conceded in the shorter run.

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